2018, Volume 71 - Issue 4
RSS feed citation: At RePEc
Publication date: 07 November 2018
IMPACT OF TRADE OPENNESS ON ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM SOUTH AFRICARead the article
TRADE OPENNESS AND ECONOMIC GROWTH IN SADC COUNTRIESRead the article
CAUSALITY TESTING BETWEEN TRADE OPENNESS, FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH: FRESH EVIDENCE FROM SUB-SAHARAN AFRICAN COUNTRIESRead the article
Garikai MAKUYANA, Department of Economics, University of South Africa, Pretoria, South Africa
Nicholas M. ODHIAMBO, Department of Economics, University of South Africa, Pretoria, South Africa
This paper investigated the dynamic contributions of public and private investment to economic growth in Zambia during the 1970 to 2014 period. In the analysis, the paper also estimated the important indirect contribution of public investment to economic growth through its crowding effect on private investment. The study employed the autoregressive distributed lag (ARDL) model in estimating the economic growth and private investment models. The empirical evidence from the study shows that private investment contributes more to economic growth than public investment in Zambia in the short run and long run. In addition, gross public investment, infrastructural and non-infrastructural public investment are found to crowd out private investment in the short run; while non-infrastructural public investment had a long run crowding out effect on private investment. The results imply that the long-run contributions of both private and public investment to economic growth in Zambia can be improved by raising the infrastructural public investment.
E22, O47, P12
Zambia, Public Investment, Private Investment, Economic Growth, Crowding in Effect, Crowding out Effect, ARDL Model
Aremo, A.G. (2013), “Private Investment and Sustainable Economic Growth in Economic Community of West Africa States (ECOWAS): Panel Data Cointegration Analysis (1986-2011)”, Journal of Sustainable Development in Africa, 15(7), 142-165.
Aschauer, D. (1989), “Is Public Expenditure Productive?”, Journal of Monetary Economics, 23(2), 177-200.
Aubyn, M.S. and A. Afonso (2008), “Macroeconomic Rates of Return of Public and Private Investment: Crowding-in and Crowding-out Effects”, Department of Economics, Technical University of Lisbon Working Paper No. WP/06/2008/DE/UECE.
Beddies, C.H. (1999), “Investment, Capital Accumulation, and Growth: Some Evidence from the Gambia 1964-98”, IMF Working Paper No. WP/99/117.
Belloc, M. and P. Vertova (2004), “How Does Public Investment Affect Economic Growth in HIPC? An Empirical Assessment”, Università degli Studi di Siena, Departimento di Economia Politica, Working Paper No. 416 Gennaio.
Berndt, E. and B. Hansson (1992), “Measuring the Contribution of Public Infrastructure Capital in Sweden”, The Scandinavian Journal of Economics, 94, S151-S168.
Bigsten, A. and S. Kayizzi-Mugerwa (2000), “The Political Economy of Policy Failure in Zambia”, Department of Economics, Göteborg University Working Paper No. 23.
Blejer, M.I. and M.S. Khan (1984), “Government Policy and Private Investment in Developing Countries”, IMF Staff Papers, 31(2), 379-403.
Crowder, W. and D. Himarios (1997), “Balanced Growth and Public Capital: An Empirical Analysis”, Applied Economics, 29(8),1045-1053.
Cullison, W. (1993), “Public Investment and Economic Growth”, Federal Reserve Bank of Richmond Economic Quarterly, 79(4), 19-33.
Devarajan, S., V. Swaroop and H-f. Zou (1996), “The Composition of Public Expenditure and Economic Growth”, Journal of Monetary Economics, 37(2), 313-344.
Engle, R.F. and C.W.J. Granger (1987), “Cointegration and Error Correction: Representing, Estimation and Testing”, Econometrica, 55(2), 251-276.
Erden, L. and R.G. Holcombe (2005), “The Effects of Public Investment on Private Investment in Developing Economies”, Public Finance Review, 33(5), 575-602.
Ghali, K.H. (1998), “Public Investment and Private Capital Formation in a Vector Error Correction Model of Growth”, Applied Economics, 30(6), 837-844.
Johansen, S. and K. Juselius (1990), “Maximum Likelihood Estimation and Inference on Cointegration with Applications to the Demand for Money”, Oxford Bulletin of Economics and Statistics, 52, 169-210.
Hague, S.T. (2013), “Effect of Public and Private Investment on Economic Growth in Bangladesh: An Econometric Analysis”, Finance Division, Ministry of Finance, Research Study Series No. FDRS 05/2013.
International Monetary Fund (2015), World Economic Outlook Database, IMF.
Kaunda, K. (1968), “Zambia’s Economic Reforms”, African Affairs, 67(269), 295-304.
Khan, M.S. and M.S. Kumar (1997), “Public and Private Investment and the Growth Process in Developing Countries”, Oxford Bulletin of Economics and Statistics, 59(1), 69-88.
Khan, M.S. and C.M. Reinhart (1989), “Private Investment and Economic Growth in Developing Countries”, International Monetary Fund Working Paper No. WP/89/60.
Ligthart, J.E. (2000), “Public Capital and Output Growth in Portugal: An Empirical Analysis”, IMF Working Paper No.WP/00/11.
Lynde, C. (1992), “Private Profit and Public Capital”, Journal of Macroeconomics, 14(1), 125-142.
Mallick, S.K. (2002), “Determinants of Long Term Growth in India: A Keynesian Approach”, Progress in Development Studies, 2(4), 306-324.
Mudenda, G. (1984), The Process of Class Formation in Contemporary Zambia, in: K. Woldring (Ed.), “Beyond Political Independence: Zambia’s Development Predicament in the 1980’s”, Berlin: Mouton.
Odedokun, M.O. (1997), “Relative Effects of Public versus Private Investment Spending on Economic Efficiency and Growth in Developing Countries”, Applied Economics, 29(10), 1325-1336.
Odhiambo, N.M. (2008), “Financial Depth, Savings and Economic Growth in Kenya: A Dynamic Causal Linkage”, Economic Modelling, 25(4), 704-713.
Pesaran, M.H. and Y. Shin (1999), An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis, in: S. Strom (Ed.), “Econometrics and Economic Theory in the 20th Century”, The Ragnar Frisch Centennial Symposium: Cambridge University Press.
Pesaran, M.H., Y. Shin and R.J. Smith (2001), “Bounds Testing Approach to the Analysis of Level Relationship”, Journal of Applied Econometrics, 16(3), 289-326.
Phetsavong, K. and M. Ichihashi (2012), “The Impact of Public and Private Investment on Economic Growth: Evidence from Developing Asian Countries”, Hiroshima University, International Development and Cooperation Discussion Paper 2012.
Republic of Zambia (1979), Third National Development Plan 1979 to 1983, Office of National Development and Planning: Zambia.
Republic of Zambia (2004), Private Sector Development Reform Programme 2006-2009, Ministry of Finance and National Planning: Zambia.
Republic of Zambia (2006), Fifth National Development Plan 2006-2010, Ministry of Finance and National Planning: Zambia.
Republic of Zambia (2011), Sixth National Development Plan 2011-2015, Ministry of Finance and Planning: Zambia.
Sahoo, P., R.K. Dash and G. Nataraj (2010), “Infrastructure Development and Economic Growth in China”, Institute of Developing Economies Discussion Paper No. 261.
Shrestha, M.B. and K. Chrowdhury (2007), “Testing Financial Liberalisation Hypothesis with ARDL Modelling Approach”, Applied Financial Economics, 17(18), 1529-1540.
Solow, R.M. (1956), “A Contribution to the Theory of Economic Growth”, Quarterly Journal of Economics, 70(1), 65-94.
World Bank (2015), World Development Indicators, World Bank: Washington DC.
Yang, Z. (2006), “Empirical Studies on the Relationship Between Public and Private Investment and GDP Growth”, Applied Economics, 38(1), 1259-1270.